Large investors, wary of September’s traditional seasonal downturns, moved to lock in profits on Tuesday, according to traders and research firms – a sign that the sell-off in technology shares may reflect a broader retreat from risk.
The tech-heavy Nasdaq (.IXIC) and the wider S&P 500 (.SPX) both fell sharply, led by declines in technology stocks that had surged for much of the year. Nvidia (NVDA.O) dropped 3.5 per cent, its steepest fall in nearly four months.
“This week’s tech sell-off looks less like panic and more like a general reshuffling of risk,” said Bruno Schneller, managing director at Erlen Capital Management. “We’ve seen crypto, high-beta tech and AI beneficiaries all come under pressure at the same time, which suggests investors are trimming exposure across multiple risk assets rather than reacting to a single headline.”
Two other hedge fund investors, speaking anonymously, said a momentum shift was under way, with funds and asset managers selling their winners. The pattern was also evident earlier on Wednesday in Korean tech shares and Chinese biotech-related equities, one investor noted. They warned this week’s moves could foreshadow trends in the weeks ahead.
September slowdown
Scott Rubner, head of equity and derivatives strategy at Citadel Securities, pointed out that since 1928, the S&P 500 index has often peaked on or around 3 September, before sliding in most years thereafter. September typically sees stock buying fade as retail demand slows and corporate buybacks pause in mid-month for regulatory reasons, Rubner said.
“After a summer of strong positioning and relentless upside, September historically brings a shift,” he added.
Citadel also noted that systematic traders such as hedge funds and trend-followers have already completed much of their buying, leaving little appetite to push equities higher. The final week of August usually sees low volumes due to holidays, which can create upward drift in stocks, Rubner said.
Meanwhile, larger asset managers will begin rebalancing portfolios ahead of the quarter’s close in September.
“Mostly, we’ve run out of catalysts to buy more. Valuations are high. What can you point to that would justify them going any higher?” asked Dan Izzo, founder of hedge fund BLKBRD.
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